Safety

Pennsylvania upholds tax-exempt status for buses, parts

School buses and their related parts will remain tax-free. Gov. Edward Rendell had proposed earlier this year to repeal these exemptions, along with those for 73 other goods and services, but the move received little support from the General Assembly.

HARRISBURG, Pa. — School buses statewide and their related parts will continue to be exempt from having sales tax after the General Assembly declined to support a proposal by Gov. Edward Rendell to repeal the exemptions.

Pennsylvania’s sales tax was adopted in 1953 and the levy applied to nearly all tangible goods. Since then, 74 categories of goods and services — including school buses and their parts — have been exempted through amendments approved by the General Assembly.

When Rendell announced his budget for 2010-11 earlier this year, he proposed reducing the sales tax rate from 6 percent to 4 percent while also expanding the sales and use tax base by eliminating the 74 tax exemptions.

Rendell told business and community leaders during several visits to cities throughout the state that cutting the state sales tax would boost retail sales and help close future state budget gaps, and that “businesses that have gotten a pass on sales taxes will now have to pay their fair share.”

“My proposal lowers the sales tax, eliminates special interest exemptions on items except necessities like food, clothing and medications, and increases fairness because every item not subject to the sales tax makes the tax on everything else far too high,” Rendell told a group of business leaders in Pittsburgh in February.

The changes were supposed to take effect on Sept. 1.

Upon learning of the governor’s proposal, the Pennsylvania School Bus Association (PSBA) took action. It developed a position statement opposing the sales tax exemption repeal and asked its members to use the statement as needed to contact their legislators and inform them that they opposed the proposal.

The position statement noted that the sales and use tax expansion would burden the school bus industry with additional taxes, make Pennsylvania less competitive and increase the cost of doing business in the state.

The PSBA also joined forces with the Pennsylvania Chamber of Business and Industry and several other associations and groups to contest the tax exemption repeal.

Selina Pittenger, executive director of the PSBA, told SBF that the coalition comprises more than 15 associations representing industries and services that the repeal would have a significant impact on.

“For a school bus contractor in Pennsylvania, taxing school bus purchases and other school bus-related products alone would have a detrimental impact, and many of the other 73 exemptions would also impact their business in Pennsylvania,” Pittenger said.

The coalition organized a press conference at the state capitol — in which several Democratic senators who opposed the proposal participated — and finalized an op-ed piece that was to be distributed to legislators and newspapers detailing how the proposal would affect businesses and services.

The op-ed piece, “walks through a typical day for a citizen in Pennsylvania. It outlines how a person will be taxed from the time they wake up until the time they close their eyes at night,” Pittenger explained. However, she said that because the coalition believes that the sales tax exemption repeal is moot at this point, it is holding it.

It was at a meeting in May that it became apparent to the members of the coalition that the repeal was not receiving much support — if any — from the General Assembly. The coalition then decided to monitor activity over the summer and prepare for any resurgence in the fall. “Many of those involved with the coalition believe that legislators will leave this to the next administration,” Pittenger said.

While Pittenger said that the PSBA is relieved that the governor’s proposal has been tabled, it is still concerned, as a new administration will take office in 2011.

“We are prepared to address the issue with the new administration if repealing the tax exemption for school buses should resurface,” she added.